The British government has announced that it will impose a 25% “windfall tax” on the profits of
oil and gas companies.
The 25% tax on energy companies will raise about £5 billion British pounds ($6.3 billion U.S.) to
finance one-off grants of £650 British pounds to more than eight million of the poorest
households in the United Kingdom.
The British government is under pressure to support citizens who are seeing their personal
finances hurt by high oil and natural gas prices that are fueling record inflation.
Around eight million British pensioners will receive payments of £300 British pounds while
energy bills will also be subsidized by £400 British pounds for every household in the United
Kingdom. The package will cost a total of £15 billion British pounds.
Senior ministers in the British government had opposed a special tax on energy firms because
they feared it would curtail investment. It’s especially sensitive now because it’s a key policy of
the main opposition Labour Party and undermines the Conservative government’s claim to be
the party of business and free markets.
But the demands to intervene in the United Kingdom’s cost-of-living crisis have become
overwhelming, with a windfall tax increasingly popular among British citizens.
The need for government support became more urgent this week when the United Kingdom’s
energy regulator warned that Britons face a sharp jump in their power and gas bills just before
this winter.
The energy price cap is due to rise to a record £2,800 British pounds in October, a 42% average
increase to household bills that is estimated to send 12 million British households into what the
media is calling “fuel poverty.”
Shares of international oil firms Shell (SHEL) and BP (BP) fell slightly on news of the new British
tax before rebounding to end the trading day (May 26) higher.
